TaxTMI 
TaxTMI 
2018 (12) TMI 863
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....the Finance Act, 1994 read with Rule 15 of the CENVAT Credit Rules, 2004. 9.4 I do not impose penalty under Section 76 of the Finance Act, 1994 on the Assesseee. 9.5 I impose penalty of Rs. 5000/- (Rupees Five Thousand Only) under Section 77 of the Finance Act, 1994." b. Order in Original No 71/SK/M-I/2013-14 dated 18/032014 "15.1 I confirm demand of Cenvat Credit of Rs. 21,31,20,807/- (Rupees Twenty One Crores Thirty One Lakhs Twenty Thousand Eight Hundred Seven Only) under Rule 14 of the CENVAT Credit Rules, 2004 read with proviso to Section 73(1) of the Finance Act, 1994. 15.2 I appropriate the amount of Rs. 21,31,20,807/- (Rupees Twenty One Crores Thirty One Lakhs Twenty Thousand Eight Hundred Seven Only) paid by the Assessee against the demand confirmed at para 15.1. 15.3 I order for recovery of Interest of Rs. 3,31,11,198/- under Rule 14 of the CENVAT Credit Rules, 2004 read Section 75 of the Finance Act, 1994. 15.4 I impose a penalty of Rs. 200/- per day during which the failure continues or @2% of such tax per month, whichever is higher, not exceeding the amount of Service tax short paid under section 76 of the Finance Act, 1994. 15.5 I impose penalty of Rs.....
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.... 2007054337 31.03.2011 1,13,40,918 3 2007013850 30.06.2010 3,00,59,294 Total Excess Credit taken and reversed 15,31,63,793 4 2007049649 01.03.2011 1,55,66,509 5 2007054894 31.03.2011 3,09,69,467 6 2007049651 01.03.2011 1,34,21,038 Service Tax short paid and paid subsequently 1,63,32,785 Total 21,31,20,807 2.5 Though appellants have reversed the credit, they were not able to the explain the reasons for the said discrepancy. They also not paid interest as was required to be paid. Thus interest was computed on the basis of date of availment of excess credit as is indicated in table 3 below: Table 3: Interest to be paid Date of Amount' Rs No of Days Interest @ 13% p.a. Excess Credit/ payment Reversed/Paid 21.07.2009 30.06.2010 11,17,63,581 344 1,36,93,335 21.07.2009 31.03.2011 1,13,40,918 618 24,96,245 06.05.2010 30.06.2010 3,00,59,294 55 5,88,833 Interest on Excess Credit taken/subsequently reversed 1,67,78,413 31.03.009 01.03.2011 1,55,66,509 700 38,80,965 05.10.2008 31.03.2011 3,09,69,467 907 1,00,04,411 05.10.2009 01.03.2011 1,34,21,038 512 24,47,409 Interest on Service Tax Short Paid 1,63,32,785 Total I....
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....Rs. 1,67,78,413/- in respect of the credit which was only availed but not utilized by them {CCE vs Bombay Dyeing and Manufacturing Co Ltd [2007 (215) ELT 3 (SC)], Bill Forge Pvt Ltd [2011-TIOL-799-HC-Kar-CX], CCE vs Dynaflex Pvt Ltd. [2011 (266) ELT 41 (Guj)], CCE vs Strategic Engineering (P) Ltd [2014-TIOL- 466-HC-Mad-CX], Sharda Energy and Minerals Limited [2013 (291) ELT 404 (t-Del)], Pearl Insulation Limited {2012 (281) ELT 192 (Kar)], Gokuldas Images (P) Ltd [2012 (278) ELT 590 (Kar)]} b. They have not availed excess credit to the extent of Rs. 3,00,59,294/- during the Financial Year 2009-10. c. They are not liable to pay interest amounting to Rs. 1,63,32,785/- for delay in making debit entries in the book of account for utilization of CENVAT Credit for payments of short paid out service tax. d. They have not short paid the service tax amounting to Rs. 1,34,21,038/-. They were liable to pay service tax amounting to Rs. 1,34,21,038/- on account of PO Mail documents & Cargo uplifted in domestic sector for the FY 2009-10. This liability was disclosed in the ST-3 returns from time to time and shown to be discharged from the CENVAT Credit account. However the journal entries for....
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....T 139 (T-Del)], Suzlon Energy Ltd {2016 (39) ELT 87 (T-Ahd)] 4.3 Arguing for the revenue learned Authorized representative submitted that it is an admitted that fact that the appellant had taken excess credit and also had short paid the service tax at relevant time. It is also an admitted fact that they were not filing the ST-3 return by the due date. In fact for the years 2008-09 and 2009-10 the ST-3 return was filed only in 2010-11. He relied upon the decision of the Apex Court in case of Ind-Swift Laboratories [2011 (265) ELT 3 (SC)} and Bombay High Court in case of GL & V India Pvt Ltd [2015 (321) ELT 611 (Bom)]. In case of J K tyre & Industries Ltd [2016 (340) ELT 193 (T-LB) larger bench has chosen to follow the decision of the Bill Forge only for the reason that the unit was in the jurisdiction of that High Court. He further submitted relying on the various decisions of tribunal that interest is to be levied in case where the appellants have taken the excess credit or short paid the service tax. He further submitted that this is cases where appellant has deliberately suppressed the facts by not filing the ST-3 returns by due date with intention to evade the payment of tax. ....
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.... all exempted services provided by him and such option shall not be withdrawn during the remaining part of the financial year. Explanation-II. - For removal of doubts, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service. (3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or provider of output service shall follow the following procedure and conditions, namely:- (a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars; namely :- i. name, address and registration No. of the manufacturer of goods or provider of output service; ii. date from which the option under this clause is exercised or proposed to be exercised; iii. description of dutiable goods or taxable services; iv. description of exempted goods or exempted services; v. CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condit....
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....or in relation to manufacture of exempted goods or provision of exempted services = (M/N) multiplied by P, where L denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, N denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year and P denotes total CENVAT credit taken on input services during the financial year. (d) the manufacturer of goods or the provider of output services, shall pay an amount equal to the difference between aggregate amount determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before the 30Th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid; (e) the manufacturer of goods or the provider of output services, shall, in addition to the amount short paid, be liable to pay interest at the rate of twenty four percent per annum, from the due date, i.e., 30th Jun 2008 till the date of payment, where the amount short paid is not paid by the said due date; (f....
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....d for the reason of rounding of the percentage/ ratio of reversal As per the practice followed by them they were rounding off to the nearest whole number the percentage/ ratio of reversal. Thus during the Financial Year 2008-09 the percentage/ ratio determined by them was 90.4%, they rounded off the same to 90% and reversed the credit accordingly. To buttress their argument, they stated that in the year 2009-10, the said ratio was calculated as 86.5%, but rounded off by them to 87%. Thus during the year 2008-09 they after reversal availed credit of 10% of the credit taken and during the year 2009- 10, 13% of the credit taken. The said contention of the appellants has been considered by the Commissioner in para 8.5 of his order as follows: "I observe that the Assessee had claimed that the short reversal was due to the system of rounding adopted by them and there was no intention of evading Service Tax on their part. In this regard I see that the Assessee had adopted the system of rounding off the ratios to nearest whole number for their convenience. They were also aware that the said system resulted in variation of correct amount of CENVAT Credit available to them and the amount ca....
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....manner. This proposition of law laid down in Taylor Vs. Taylor (1875) 1 Ch D 426,431 was first adopted by the Judicial Committee in Nazir Ahmed Vs. King Emperor reported in AIR 1936 PC 253 and then followed by a bench of three Judges of this Court in Rao Shiv Bahadur Singh Vs. State of Vindhya Pradesh reported in AIR 1954 SC 322. This proposition was further explained in paragraph 8 of State of U.P. Vs. Singhara Singh by a bench of three Judges reported in AIR 1964 SC 358 in the following words:- "8. The rule adopted in Taylor v. Taylor is well recognised and is founded on sound principle. Its result is that if a statute has conferred a power to do an act and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any other manner than that which has been prescribed. The principle behind the rule is that if this were not so, the statutory provision might as well not have been enacted...." This proposition has been later on reiterated in Chandra Kishore Jha Vs. Mahavir Prasad reported in 1999 (8) SCC 266, Dhananjaya Reddy Vs. State of Karnataka reported in 2001 (4) SCC 9 and Gujarat Urja Vikas Nigam Limited vs. Essar Power....
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....of the Appellants that short payment of the amount to be reversed during the year 2008-09 with excess payment made by them during the year 2009-10 to cannot be accepted, because the Rule 6(3A)(c) itself provides for determination of the amounts Financial Year wise. 8.1 From the para 1.10 of the Appeal memo, appellants have explained the availment of excess credit as follows: Table Particulars Financial Year 2008-09 2009-10 Monthly Reversal (Provisional) Ratio, 6(3A)(b) 91.25 84.0 Net Credit Availed during the Financial Year 12.51 26.01 Final Reversal/ Credit Ratio, 6(3A)(c) as on 30th June 83.86 87.0 Total Credit Availed during Financial Year 35.84 23.01 Subsequent Adjustment as 90.0 13.87 Adjusted Credit Availed during Financial Year 23.53 28.98 Excess Credit availed and subsequently reversed 12.31 3.00 Total Excess Credit taken 15.31 Thus the appellants also admit that they have taken excess credit at various times which has to be adjusted. From this table it is quite evident that the plea of appellant with regards to rounding off is totally erroneous as from the table above it is seen that appellant had been taking the credit by determining ....
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....ourt on a conjoint reading of Section 11AB of the Act and Rules 3 & 4 of the Credit Rules proceeded to hold that interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is wrongly utilized. In our considered opinion, the High Court misread and misinterpreted the aforesaid Rule 14 and wrongly read it down without properly appreciating the scope and limitation thereof. A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal. Rule 14 specifically provides that where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest would be recovered from the manufacturer or the provider of the output service. The issue is as to whether the aforesaid word "OR" appearing in Rule 14, twice, could be read as "AND" by way of reading it down as has been done by the High Court. If the aforesaid provision is read as a whole we find no reason to read the word "OR" in between the expressions 'taken' or 'utilized wrongly' or has been erroneously refunded' as the word "AND". On the happening o....
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....lid legislation. This also keeps courts within their track and checks individual zeal of going wayward. Yet in spite of this, if the impugned legislation cannot be saved the courts shall not hesitate to strike it down. Similarly, for upholding any provision, if it could be saved by reading it down, it should be done, unless plain words are so clear to be in defiance of the Constitution. These interpretations spring out because of concern of the courts to salvage a legislation to achieve its objective and not to let it fall merely because of a possible ingenious interpretation. The words are not static but dynamic. This infuses fertility in the field of interpretation. This equally helps to save an Act but also the cause of attack on the Act. Here the courts have to play a cautious role of weeding out the wild from the crop, of course, without infringing the Constitution. For doing this, the courts have taken help from the preamble, Objects, the scheme of the Act, its historical background, the purpose for enacting such a provision, the mischief, if any which existed, which is sought to be eliminated............................ ...........................................................
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....the ST-3 return but the debit entries were made only subsequently. 2007049651 dated 1.03.2011 2009-10 1,34,21,038 2007054894 dated 31.03.2011 2008-09 3,09,69,467 On account of wrong booking of the passenger revenue during 1.04.08 to 30.09.08. Subsequently corrected and paid ithe tax short paid in FY 2010-11 Total 5,99,57,014 It is also a fact that appellants had not filed the service tax returns during the relevant period by the due date. The service tax returns for the year 2008-09 and 2009-10 were filed only in 2010-11 (Para 1.7 and 1.8 of the appeal memo). Thus when the appellants had short paid the service tax the interest on such short payment is also due. It is now settled law that interest in respect of the short payment of taxes is strict civil liability and has to be complied with. 8.4 During the course of argument in respect of the second appeal in respect of the order at (ii) of para 1, supra, Counsel for the appellants have submitted a rough sheet explaining the credits taken by them and reversed year wise. The said sheets are reproduced below in form as submitted as they are also admit the facts as stated above in the appeal memo. 8.5 From the discu....
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....utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacture or the provider of the output service and the provisions of sections 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries. A reading of the aforesaid provisions makes it very clear that the said provision is attracted where the Cenvat Credit has been taken or utilized wrongly or has been erroneously refunded. In view of the aforesaid judgment of the Apex Court, the question of reading the word 'and' in place of 'or' would not arise. It is also to be noticed that in the aforesaid Rule, the word 'avail' is not used. The words used are 'taken' or 'utilized wrongly'. Further the said provision makes it clear that the interest shall be recovered in terms of Section 11A and 11B of the Act. 20. From the aforesaid discussion what emerges is that the credit of excise duty in the register maintained for the said purpose is only a book entry. It might be utilised later for payment of excise duty on the excisable product. It is entitled to use the credit at any time thereafter when making payme....
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....ke, the assessee is liable to pay interest from the date the entry was made in the register showing the availment of credit. According to the Revenue, once tax is paid on input or input service or service rendered and a corresponding entry is made in the account books of the assessee, it amounts to taking the benefit of Cenvat credit. Therefore interest is payable from that date, though, in fact by such entry the Revenue is not put to any loss at all. When once the wrong entry was pointed out, being convinced, the assessee has promptly reversed the entry. In other words, he did not take the advantage of wrong entry. He did not take the Cenvat credit or utilized the Cenvat Credit. It is in those circumstances the Tribunal was justified in holding that when the assessee has not taken the benefit of the Cenvat credit, there is no liability to pay interest. Before it can be taken, it had been reversed. In other words, once the entry was reversed, it is as if that the Cenvat credit was not available. Therefore, the said judgment of the Apex Court has no application to the facts of this case. It is only when the assessee had taken the credit, in other words by taking such credit, if he h....
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....rsal of the entry is after a period of ten months. In that view of the matter, we find that even on facts, the said judgment is distinguishable. 16. In so far as the judgment passed by the Madras High Court is concerned, the Madras High Court has taken a view that mere taking of Cenvat credit facility is not at all sufficient for compelling the assessee to pay interest as well as penalty. With great respect to the Hon'ble Judges of the Madras High Court, we may say that this is not what has been held by their Lordships of the Apex Court. The Apex Court has in clear terms held that the interpretation as paced by the Punjab and Haryana Court for invoking the provisions of Rule 14, there has to be taking as well as utilizing is not correct in law. The Apex Court has held that such an interpretation is totally impermissible. In that view of the matter, the said judgment would be of no assistance to the case of the assessee." 9.4 In case of Vandana Vidyut Ltd [2016 (331) ELT 231 (Chattisgrah)], this Chattisgarh High Court has held - "9. The aforesaid consideration takes it beyond the ambit of any controversy that under Rule 14, even if the Cenvat credit was taken by making paper en....
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.... longer res integra. Bombay High Court has in case of Commissioner Of Central Excise vs Padmashri V.V. Patil Sahakari [2007 (215) ELT 23 Bom] has held as follows: "10. So far as interest Under Section 11AB is concerned, on reference to text of Section 11AB, it is evident that there is no discretion regarding the rate of interest. Language of Section 11AB(1) is clear. The interest has to be at the rate not below 10% and not exceeding 36% p.a. The actual rate of interest applicable from time to time by fluctuations between 10% to 36% is as determined by the Central Government by notification in the official gazette from time to time. There would be discretion, if at all the same is incorporated in such notification in the gazette by which rates of interest chargeable Under Section 11AB are declared. The second aspect would be whether there is any discretion not to charge the interest Under Section 11AB at all and we are afraid, language of Section 11AB is unambiguous. The person, who is liable to pay duty short levied / short paid / non levied / unpaid etc., is liable to pay interest at the rate as may be determined by the Central Government from time to time. This is evident from....
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....of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute" 11.3 The said para has been considered by the Apex Court subsequently number of times and Apex Court has after considering the said decision laid down as follows in the case of Bhartiya Steel Industries vs Commissioner Sales Tax U P []: "16. Reliance has also been placed on Director of Enforcement v. M.C.T. M. Corporation Pvt. Ltd. & Others [(1996) 2 SCC 471]. This Court was dealing therein with Foreign Exchange Regulation Act, 1947. It was opined that Section 23(1(a) of the Act confers adjudicatory function on the conduct of the delinquent, stating : "8. It is thus the breach of a "civil obligation" which attracts 'penalty' under Section 23(1)( a ), FERA, 1947 and a finding that the delinquent has contravened the provisions of Section 10, FERA, 1947 that would immediately attract the levy of 'penalty' under Section 23, irrespective of the fact whether the contravention was made by the defaulter with any "guilty intention" or not. Therefore, unlike in a criminal case, where it is essential for the 'pr....
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.... whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. The impugned order, therefore, suffers from non- application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. v. CIT) 87. We have, however, noticed hereinbefore that the Income Tax Officer had merely held that the assessee is guilty of furnishing of inaccurate particulars and not of concealment of income; which finding was arrived at also by the Commissioner of Income Tax and the Income Tax Appellate Tribunal." In Chairman, SEBI v. Shriram Mutual Fund [(2006) 5 SCC 361], this Court held: "35. In our considered opinion, penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulations is established and hence the intention of the parties committing such violation becomes wholly irrelevant. A breach of civil obligation which attracts penalty in the nature of fine under the provisions of....
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....ed. 5. Section 11AC of the Act reads as under :- Penalty for "11AC. short-levy or non-levy of duty in certain cases. - Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined : Provided that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Court, then, for the purposes of this section, the duty as reduced or increased, as the case may be, shall be taken into account." 6.On the basis of the aforesaid language in the Section, the submission of Mr. Radhakrishnan is meritorious. Thus, while the penalty as demanded in respect of one Show Cause Notice had been quashed, the Tribunal could not reduce it for an amount lesser than the duty which has been upheld. The duty....